Physical side dropping but still reps 62% of business

Movie rentals on digital platforms continue to grab the home-video spotlight, with the segment growing 5% over the past year, but U.S. consumers are still renting discs in big numbers.

Though physical disc rentals declined 17%, nearly 62% of film rentals are still taking place through Netflix’s DVD and Blu-ray by mail service, kiosks run by Redbox and other companies and videostores like Blockbuster, according to research firm NPD Group. Subscription-based streaming services, pay TV video-on-demand and online VOD account for the remaining 38%.

Kiosks dominate with 45% of the disc rental market, growing 5% over the past year.

Overall, movie rentals through all sources are down 10%. But digital rentals are up 5% over 2011.

Netflix leads with 66% market share in the online film rentals, and that’s despite the fact that TV content represents 80% of Netflix’s rental activity.

Pay-TV VOD accounted for 28% of digital orders, while Internet VOD followed with 6%.

The numbers are in line with the Digital Entertainment Group’s recent report that the overall rental market, including VOD, declined 18% to nearly $1.7 billion over the first six months of 2012 (Daily Variety, July 29).

During the period, kiosk operators saw revenues rise 23% to $990 million as traditional rental stores saw business decline 33% to $598 million.

“Kiosk and subscription Internet streaming are generating strong user satisfaction ratings, including future rental intent, price and value, which is reflected in market-share gains,” said Russ Crupnick, senior VP of industry analysis for the NPD Group. “Netflix is frequently the most popular video application on connected devices, so an increase in households with Web-connected Blu-ray Disc players, tablets, and smart TVs will lead to still more video streaming activity.”